10-QPeriod: Q3 FY2017

DOLLAR GENERAL CORP Quarterly Report for Q3 Ended Oct 28, 2016

Filed December 1, 2016For Securities:DG

Summary

Dollar General Corporation (DG) reported its third-quarter results for the period ending October 28, 2016. Net sales increased by 5.0% to $5.32 billion, driven by both new store openings and an increase in average transaction amount, though same-store sales saw a slight decrease of 0.1% due to lower customer traffic. While net income decreased to $235.3 million from $253.3 million in the prior year's quarter, diluted earnings per share remained relatively stable at $0.84 compared to $0.86. The company continues its aggressive expansion strategy, opening a significant number of new stores and relocating existing ones, including the acquisition of 42 former Walmart Express locations. Despite challenges in customer traffic and some deflationary pressures impacting sales, Dollar General maintained a strong focus on cost management and operational efficiency. The company also continued its commitment to shareholder returns through significant share repurchases and dividend payments.

Financial Highlights

44 data points
Beta

Revenue

$5.32B

29.8% Gross Margin

Net Income

$235.31M

4.4% Net Margin

EPS (Diluted)

$0.84

Total Assets

$11.92B

Cash & Equivalents

$200.24M

Free Cash Flow

$331.08M

Financial Statements
Beta
Revenue$5.32B
Cost of Revenue$3.73B
Gross Profit$1.59B
SG&A Expenses$1.19B
Operating Income$392.99M
Interest Expense$23.88M
Net Income$235.31M
EPS (Basic)$0.84
EPS (Diluted)$0.84
Shares Outstanding (Basic)280.44M
Shares Outstanding (Diluted)281.28M

Key Highlights

  • 1Net sales increased by 5.0% to $5.32 billion for the 13 weeks ended October 28, 2016, compared to the same period in 2015.
  • 2Same-store sales decreased by 0.1%, indicating a slight decline in customer traffic, partially offset by an increase in average transaction amount.
  • 3Net income for the quarter was $235.3 million, a decrease from $253.3 million in the prior year's quarter.
  • 4Diluted earnings per share were $0.84 for the quarter, down slightly from $0.86 in the prior year.
  • 5The company opened 768 new stores and remodeled or relocated 861 stores during the 39 weeks ended October 28, 2016, demonstrating continued expansion.
  • 6Cash generated from operating activities increased significantly by 39.0% to $1.12 billion for the 39-week period.
  • 7Dollar General continued its share repurchase program, buying back $679.4 million worth of stock during the 39-week period.

Frequently Asked Questions

The net sales increase was driven by the addition of new stores and an increase in the average transaction amount. However, same-store sales experienced a slight decrease due to a decline in customer traffic, with some deflationary pressures also impacting sales performance.

Net income decreased primarily due to a rise in Selling, General, and Administrative (SG&A) expenses, which increased as a percentage of sales. Factors contributing to this included higher retail labor and occupancy costs, as well as expenses related to the acquisition and relocation of former Walmart Express stores and increased disaster-related costs.

Dollar General's growth strategy involves expanding its store footprint through new openings and relocations, including the acquisition of former Walmart Express locations. They are also focused on driving profitable sales growth by improving in-stock positions, enhancing margins through category management, and investing in their people.

Inventory management is a key focus for Dollar General. While merchandise inventories increased, the company is working to improve its in-stock position of core products. The company also aims to reduce inventory shrinkage and optimize inventory levels through efficient purchasing and distribution.